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Most marketers are aware of the connection between behavioral psychology and the science of selling. However, for even expert marketers, behavioral economics can represent slightly uncharted territory. Behavioral economics is an interdisciplinary approach to understanding the science of why people act the way they do, which draws from both the disciplines of economics and psychology.
Humans are irrational, and they don't always act in immediately predictable ways. It's a fact that's plagued marketers for generations. As Harvard Magazine highlights, behavioral economics is an attempt to understand why we do thinks that don't immediately make sense, like failing to save for retirement or delaying quitting smoking.
Why Behavioral Econ Matters
Behavioral psychology definitely is a tool for understanding many of the basics. Knowledge of this field can explain why humans are attracted to interactive marketing (a desire for surprise). It explains the negativity bias (no one wants to experience pain). However, taking a dive into behavioral econ can shed some light on serious complexities that affect most of us beyond pure selfishness like "imperfect self-control," or "social preferences."
There's a great deal of factors at play in determining why humans act the way we do. While behavioral econ isn't perfect, it's certainly an important tool for marketers to deepen their understanding of the science of selling. Join us as we review some must-read books for inbound marketing education.
University of Chicago professor Dr. Richard H. Thaler is a leading expert in the field of behavioral economics. Early in his academic career, Thaler recognized that a key concept in economics, that humans were "rational actors" who behaved in predictably selfish ways, just wasn't reflective of reality. Thaler postulated that "deviations" from expected behavior and bad behavior patterns are predictable forces that have real consequences.
By reading Thaler's book, marketers will gain the knowledge of how to protect themselves against poor, impulse-driven decisions. Perhaps more importantly, you'll begin to understand the complex interactions between human behavior, incentives, and the economy -- and how to shape these factors. As a fair warning, this isn't the lightest read on the list, but it's certainly worth your time.
The authors of this book, Christopher Chabris and Daniel Simons, are behind a famous psychological experiment. A controlled group of viewers was asked to observe the number of passes in a video of a basketball game. Unfailing while counting the passes, the viewers didn't notice that a gorilla walked right through the game.
Lesson learned? Our intuitions and brains can fail us. This principle explains why companies launch products that are predicted to fail, and why we miss clear signs around us. You'll emerge from reading this book a lot less sure of yourself, but with a far better understanding of the weakness of human perception.
Daniel Kahneman, winner of the Nobel Peace Prize in Economics, provides marketers with a quick overview of the two systems that drive human behaviors. The first is quick and emotional, and the second is far more logical. When we rely on the first system for decisions that are best made slowly, it can lead to disaster.
Marketers who read this book will emerge with a better understanding of how to stick with their second system when it comes to making investment, purchase, and business decisions. Fortunately, your prospects won't be any wisers to Kahneman's distinction between thinking quickly or slowly, so you can appeal to them on both levels.
With the power of prediction, marketers would never struggle to meet their monthly KPIs. They'd never launch a campaign that met mediocre results. The power of prediction can lead to wild success in business and life, but it's remarkably hard to come by. Authors Philip E. Tetlock and Dan Gardner focus in on the very small percentage of the population who are able to consistently predict outcomes to determine their secrets, even though they may lack access to privileged information.
Tetlock and Gardner conclude that it doesn't require sophisticated algorithms or top-secret intelligence to predict outcomes. "Superforecasters" gather information from many different sources, think in terms of probability, work in teams, and engage in certain other effective habits. After reading this light, informative book, you'll be able to emulate their behavior.
Dan Ariely's New York bestselling book is one of the leading introductions to behavioral economics for non-professionals. If you have to choose just one book from this list, it's a fantastic place to start.
Ultimately, if people were perfectly predictable, psychology would be enough for marketers. People would make purchases after a consistent length of time, and typically make the right decision. However, that's not reflective of reality. With Ariely's book, you'll learn why people "overpay, underestimate, and procrastinate" -- and how to capitalize on these harmful behavior patterns.
Anyone who's spent much time reading up on sales or decision sciences is familiar with Dr. Robert Cialdini. He's a premier expert in the field of persuasion. This book is perhaps his seminal works, and it's a must-read for anyone in the field of marketing.
Cialdini breaks persuasion down into six tactics in this book, which allows readers to protect themselves against powerful persuaders while learning how to convince others. While this book doesn't delve into the community-oriented or social aspects of behavioral economics, it's a powerful primer in why humans can suddenly act in ways that are hard to explain.
Why are some product-driven startups bankrupt within weeks of launch, while others are able to create industry-wide disruption? Author Nir Eyal draws from his background in marketing and video games to present his unique theory on why some products are just naturally more addicting than their competition.
Eyal's book focuses on what he calls the "hook model," which is a four-part concept that the world's most successful companies knowingly or unknowingly follow. Creating addictive messaging doesn't require a massive budget, but it depends on factors like reward and investment.
Humans and the forces that motivate human behavior will probably always be somewhat of a mystery to marketers. However, by taking a self-directed crash course in the science of behavioral economics, you can begin to uncover patterns that explain human irrationality.
Have you read any of these books on behavioral econ? What are some of the best economics, psychology, or marketing books you've read in your career?